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TMI Blog2002 (7) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bills of Entry involving utilisation of DEPB in question as mentioned in Annexure-VII. The proceedings relating to the aforesaid SCN are pending before the Commissioner of Customs, ICD, New Delhi (hereinafter referred to as the Commissioner). The applicant has accepted an amount of Rs. 2,03,69,587/- as payable by them. The SCN demands an amount of Rs. 19,44,83,561/- towards customs duty involved in goods imported by utilization of the DEPB licences in question and an amount of Rs. 1,39,91,998/- towards customs duty on import of capital goods against an EPCG licence. 2. The applications have been registered in the Commission as SA(C) 245-246/2002, dated 6-5-2002. 3. The brief facts of the case are that on receipt of an intelligence, DRI initiated inquiries in April, 1999 in the exports of CD Roms under DEPB Scheme by the applicant. Various statements were recorded and investigation carried out with the buyers of the exported goods abroad. Inquiries were also extended into the remittances of export values by the applicant. It appears from the investigation carried out that : (i) M/s. PPL exported 11,95,250 pcs of CD ROMs at grossly inflated prices to the buyers in USA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical to the CD titles exported by M/s. PPL and had been manufactured and supplied by M/s. PPL to M/s. Harshita Ltd. (vi) There was huge difference in export price of individual CD titles by M/s. PPL. The CD title Torcher was exported at US $ 29.00 per pc. as well as at US $ 39 per pc. Similarly CD title Yellow Star was exported at US $ 22.50 per pc as well as US $ 29.50 per pc. It was not understandable as to how M/s. PPL was able to export the same CD titles at such different prices to the same buyer in USA at about same time. (vii) The replication cost of CD ROMs of another well established company namely M/s. Super Cassettes Industries Ltd., Noida was as low as Rs. 12/- to Rs. 15/- per pc. Mr. Vince Webb, President, CD Micro, Mr. Wayne Sun, President M/s. Rainbow Technology, Mr. Bob Lewis, President M/s. Modern Media Ventures Inc. and M/s. Warner Brothers denied that M/s. PPL had any copyright to replicate or export their titles. Modern Media Ventures, USA, the Copyright holder of most of CD ROMs exported by M/s. PPL, categorically stated that CD ROMs were pirated or counterfeited because these did not have MMV logo, Copy right notice, trademark notices on the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The export transactions of M/s. PPL were not bona fide, genuine or based on objective market conditions. The CD ROMs had only been transferred to the US and the remittances were being arranged. No attempt was being made to sell/dispose huge quantity of CD ROMs lodged in a Public Warehouse as they had no worthwhile value. No market existed for the CD Titles exported in the US. The firms which imported the goods from M/s. PPL had been propped up by M/s. PPL at one stage or the others and the persons running these firms were also party to the fraud. (xiv) M/s. PPL had fraudulently obtained 33 DEPB Licences of total credit value of Rs. 19,44,93,767/- even without realising substantial portion of export proceeds and transferred these DEPB licences to various importers. (xv) These DEPB licences were utilized by various importers for importation of Duty free goods which led to the evasion of Customs duty. (xvi) M/s. PPL masterminded a wilful and fraudulent exercise of defrauding the Government of India by obtaining unauthorised DEPB credit which led to the evasion of Customs duty to the tune of Rs. 19,44,93,767/- M/s. PPL, therefore, was not entitled to any DEPB credit. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orter in the Annexure-VII of the SCN evaded by importing goods without payment of appropriate Customs duty against fraudulently obtained DEPB licences should not be demanded and recovered from them under Section 28(1) of the Act by invoking the first proviso to the said Section of the said Act. (iv) The said goods imported vide Bills of Entry as mentioned in Annexure-VII of the SCN should not be held liable for confiscation under Section 111(o) of the Act, 1962, and on their being not available for confiscation, why appropriate redemption fine should not be imposed under Section 125 of the Act. (v) Penalty under Section 114A of the Act should not be imposed upon them for their various offences, omissions and commissions as aforesaid. (vi) Interest should not be demanded and recovered from them under the provisions of Section 28AB of the Act. (vii) Duties of customs of Rs. 10,00,00,000/- (Rs. Ten crores) voluntarily deposited by M/s. PPL during the course of investigations as referred herein above, should not be appropriated and adjusted towards the total duties and penalties payable by the noticee under this notice. (viii) Customs duty of Rs. 1,39,91,998/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting the goods under DEPB scheme and were claiming credit after the exports have been made. According to circular issued by Ministry of Commerce if a product is entitled to credit @ 15% or more than the amount of credit shall not exceed 50% of the present market value of the export products. The applicant had made such declaration on the shipping bill in accordance with the requirement of Ministry of Commerce. The Advocate further informed the Bench that prosecution in this case has been launched against the applicant and the applicant is on bail and thus they are not seeking immunity from prosecution under the Customs Act as the Settlement Commission is not empowered to grant immunity from prosecution in cases where prosecution has been launched prior to the date of receipt of the application. The applicant also informed that DGFT had also issued a SCN dated 2-5-2001 and ex parte order has also been passed cancelling the DEPB licences under consideration, but the applicant had filed an appeal before the Appellate Authority but no order has been passed by the DGFT so far. 8.1 The Advocate further stated that the Department has alleged that the value of export goods was over-va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act refers to cases pending in the court regarding levy, assessment and collection of duty i.e. where the SCN demanding duty has been challenged in a Court of Law. The Advocate also cited a judgment in the case of Shri Aggarwal Trading Company as reported in 2001 (131) E.L.T. 711 wherein the Commission after examining various judgments of the Courts have come to the conclusion that the proviso in Section 127B does not cover cases of prosecution complaints. 8.5 As Revenue requested for sometime to examine this issue and present their arguments, the Bench directed that the case be heard again on 25-6-2002 at 11.30 AM. 9. DRI submitted further report dated 24-6-2002 under Section 127(1) of the Act. 10. The case was again heard for admission on 25th June, 2002. The Advocate for Revenue gave written submissions to the Bench. It is submitted that in view of the explicit provisions under proviso to sub-section (1) of Section 127H, of the Act the application would appear to be admissible and would not be barred merely on the ground that prosecution complaint has been launched. There are however other objections to the admission of the application as the applicant have committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legations in the show cause notice regarding wilful suppression and mis-declaration are yet to be proved. He further stated that the Department is not legally empowered to question the transfer/sale of DEPB licences to other persons by the applicant and to deny the imports by such persons under the DEPB licences. The applicant have come before the Commission to admit their liability and as the applicant satisfy all the conditions for admission, the application should be admitted. The Advocate for the applicant also countered the argument of Revenue that no immunity can be granted from interest, fine and penalty in cases where prosecutions has been launched. He pointed out that the use of words such immunity in the proviso to Section 127H(1) of the Act suggests that where prosecution has been launched immunity from such prosecution cannot be granted, but immunity can be granted from fine, penalty and interest. 10.4 The Advocate of the applicant referred to para 28 of the show cause notice to point out that duty was being jointly and severally demanded from the applicant as also the various importers who had utilized the DEPB obtained by the applicant. Further, the Advocate point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing bills and the bills of entry filed by them as also by other persons who effected imports under DEPB issued to the applicant and the show cause notice has the effect of demanding duty jointly and severally from each of them. The Advocate submitted before the Bench that he fully satisfied Clause (a) of the first proviso. The Advocate also clarified that the applicant had not accepted the cut-off date adopted by RBI in arriving at the amount of export proceeds which have not been received in the country and that they had calculated their duty liability on the basis of whatever export proceeds have been received by them till date. 11. The DRI file further report on 4-7-2002. The applicant also filed further clarification on 29-6-2002. 12. We have carefully gone through the applications, submissions made by both the sides and the reports submitted by the DRI as referred to above. 13. In order to deal with the objections of Revenue to the eligibility of the applicant to approach the Settlement Commission, it is necessary to notice the relevant provisions of the Act. Section 127B, Section 127A(b) and Section 127C(1) are the relevant provisions in this connection. These provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (1) shall not be allowed to be withdrawn by the applicant. SECTION 127A. Definitions. - In this Chapter, unless the context otherwise requires, - (b) case means any proceeding under this Act or any other Act for the levy, assessment and collection of customs duty, or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a proper officer or the Central Government on the date on which an application under sub-section (1) of section 127B is made : Provided that where any appeal or application for revision has been preferred after the expiry of the period specified for the filing of such appeal or application for revision under this Act and which has not been admitted, such appeal or revision shall not be deemed to be a proceeding pending within the meaning of this clause; SECTION 127C. Procedure on receipt of application under section 127B. - (1) On receipt of an application under section I27B, the Settlement Commission shall call for a report from the Commissioner of Customs having jurisdiction and on the basis of the materials contained in such report and having regard to the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be rejected unless the applicant has been heard by the Commission. Similarly if the Jurisdictional Commissioner of Customs does not furnish the required report within the stipulated period, it shall be presumed that the Commissioner of Customs has no objection to such application. The Commissioner, however, has the right to raise objection, if any, at the time of hearing fixed by the Commission for Admission of the application. The law also requires that the Commission shall inform the date of such hearing to the applicant and the Jurisdictional Commissioner within a period of not exceeding 2 months from the date of receipt of such application. It is clear from these provisions that the applicant is entitled under the law to approach the Commission at any stage of the pending proceedings relating to levy, assessment and collection of Customs duty payable by him. 14. It is clear from the facts of the case that the case covered by the SCN in question relates to assessment of goods inasmuch as the declared export values are being questioned and as a consequence it is being alleged that the over valuation of exports has led to excessive grant of DEPB benefits and accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd others as reported in 1997 (223) ITR 840. (iv) The admission of additional duty liability of Rs. 2,03,69,587/- by the applicant is not a full and true disclosure of their liability as there is : (a) over invoicing of exports; (b) non-grant of extension by RBI for realisation of export proceeds beyond January, 2000; (c) Non-acceptance of contentions of the applicant about domestic sale of CD Roms; and (d) Non-applicability of Board s Circular No. 23/99, dated 11-5-1999 and Circular No. 69/97, dated 8-12-1997. 16. We have considered the aforesaid objections very carefully but we are unable to agree with these objections. The case in question is clearly a case of dispute regarding valuation of export goods. There is no allegation of smuggling or clandestine import in the SCN. Revenue s reliance on the judgment of the Madras High Court also does not help them. The facts involved in the present application are not identical or similar to the facts noticed by the Hon ble Madras High Court for arriving at the ratio in their judgment and, therefore, that ratio is not relevant to the applicant s case. The Hon ble Madras High Court were dealing with a case whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should for ever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one time tax evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to Revenue, while needlessly proliferating litigation and holding up collections. We would, therefore, suggest that there should be a provision in the law for a settlement with the taxpayer at any stage of the proceedings...........Each individual case can be considered on its merits and full disclosures not only of the income but of the modus operandi of its build-up can be insisted on, thus sealing off chances of continued evasion through similar practices. (Emphasis provided) If the above recommendation is read as a whole, the intent of Justice Wanchoo Committee report is clearly in favour of giving a chance to an assessee who may have made mistakes while discharging his correct duty liability. We have already observed that in claiming that the applicant is not a one tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be proceeded if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income or perpetration of fraud by the applicant for evading any tax has been established or is likely to be established by any income-tax authority in relation to the case in question. The observations, referred to, of the Hon ble Supreme Court by Revenue have to be read in the light of the aforesaid provision of law. This provision was deleted from the Income-tax Act in 1991 and no similar provision is incorporated in the settlement provisions under the Customs Act. Revenue appears to have lost sight for this important change in law while relying upon the observations of the Hon ble Supreme Court. We may also state that so far as the settlement provisions under the Customs Act are concerned, an application can be made to the Commission if a SCN has been issued to the applicant by the proper officer in relation to the Bill of Entry or the Shipping Bill, as the case may be, filed by the applicant. Under the Customs law, a SCN is issued after the investigation is completed and, therefore, there cannot be any question of denying the admissibility ..... X X X X Extracts X X X X X X X X Extracts X X X X
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